USPS Posts $2.6 Billion Loss for First Half of Fiscal 2011

By Emily Long, GovExec.com

The U.S. Postal Service has lost $2.6 billion so far this year and will require significant help from Congress to get back on track, officials said on Tuesday. During a board meeting, Postal Service leaders reported large losses through the second quarter of 2011. USPS lost $1.9 billion in that same period in fiscal 2010. The agency continues to face long-term financial challenges and despite significant cost reductions will reach its statutory borrowing limit by the end of the fiscal year and default on a number of obligations to the federal government, officials said.

"We will still compensate employees," said James Miller, a member of the USPS board of governors. "But in the absence of legislative reform, we won't be able to pay the federal government."

Chief Financial Officer Joseph Corbett said the Postal Service does not expect to meet its cash obligations this year, including a $5.5 billion prepayment to its retiree health benefits fund, due Sept. 30. A $2.8 billion prefunding requirement for these benefits, along with a $700 million workers' compensation liability, contributed to the $2.6 billion fiscal 2011 loss.

The Postal Service could save $37.8 million annually through reform of its workers' comp program, however, according to recent findings from the USPS inspector general. Under the 1916 Federal Employees' Compensation Act, which provides basic compensation and medical, rehabilitation and death benefits for government workers injured on the job, base payouts amount to two-thirds of salary for disabled employees with no dependents and 75 percent for those with one or more dependents. The Postal Service paid $1 billion in workers compensation in 2010, along with $61 million in administrative fees.

Under a Labor Department proposal, basic compensation for total disability would be 70 percent of salary. Benefits would drop to 50 percent, however, when the employee reaches retirement, defined as between ages 65 and 67, or one year after payments begin, whichever is later. According to the OIG report, nearly 2,800 postal employees over the age of 65 receive workers' comp, including 705 who are older than 80.

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According to Corbett, the Postal Service is seeking support in Congress to make changes to the workers' comp program. Sen. Susan Collins, R-Maine, in February introduced a bill that would reduce federal workforce costs by converting employees on workers' compensation to the appropriate retirement system when they reach retirement age.

USPS has cut 2.7 percent of work hours so far this year, including a 2.1 percent drop in city delivery and a 6.3 percent decline in customer service hours. The agency has cut nearly 135,000 full-time positions in the last three years. Significant hour reductions will continue as the agency completes an administrative redesign, Corbett said.

The Postal Service is undergoing a massive workforce restructuring this year and says it will slash 7,500 jobs, including 20 percent of the administrative workforce and 10 percent of the postmaster jobs. The agency in March announced its Voluntary Early Retirement plan and $20,000 financial incentives to career nonbargaining employees at headquarters, headquarters-related field units, area offices and administrative personnel at customer service district offices. As of the April 25 deadline, only 2,000 employees had applied for the incentive. USPS late last month sent reduction-in-force notices to administrative employees to prepare them for future downsizing.